Will N.H. have a say in developing a regional low-carbon fuel standard?

Will N.H. have a say in developing a regional low-carbon fuel standard?

Published: February 10, 2012

Over the past few years, New Hampshire and 10 other states have been looking to develop a low-carbon standard for transportation fuels. The program would be market based - similar to the Regional Greenhouse Gas Initiative, and the same states would be involved, with the addition of Pennsylvania.The plan, proponents say, would create an independent energy infrastructure, slow global warming and would have benefits for New Hampshire's wood industry. Opponents, however, see it as based on faulty assumptions that would raise prices at the pump and slow the economy down.Not surprisingly, the question under debate is whether New Hampshire should participate and have a say in trying to shape the standard or not have anything to do with it at all. New Hampshire isn't the only state raising questions about the program. California, the first state to pass a standard, can't enforce it due to a December court order under appeal. The Midwestern Governors Association dropped it like a hot potato after the 2010 elections. And several of the 11 Northeast states that originally agreed to explore the clean fuel standard have pulled back."A number of states feel the political climate is not conducive to new regulations," said Mike Fitzgerald, the state's point man on this issue in the Department of Environmental Services' Air Resources Division.The low-carbon fuel standard, or clean fuel standard as it is referred to around the 11-state region, requires that oil providers cut the "carbon intensity" of their fuel by a certain percentage by a certain date. If they don't, they would have to pay into a fund that would develop alternative ways to power vehicles -- electricity, natural gas and biofuel.Developed first in California by an executive order in 2007 of then-Republican Gov. Arnold Schwarzenegger, it was seized upon by a then-longshot Democratic presidential contender from Illinois -- Barack Obama -- who unveiled his national clean fuel standard bill later that year at the University of New Hampshire."Let me tell you why this is so important," the freshman senator told the crowd. "Transportation is responsible for one-third of carbon dioxide emissions, the greenhouse gases that are contributing to global warming."Barriers seenObama's bill didn't pass -- no national standard has -- but in the wake of the Democratic sweep of the country in 2008, 11 governors signed a September 2009 memorandum of understanding "to evaluate a regional low carbon fuel program that would reduce the average carbon intensity of transportation."Even before the compact was signed, New Hampshire environmental officials were already in favor of the concept. The DES produced a Climate Action Plan, released in December 2009, that recommended the state adopt a low-carbon fuel standard."New Hampshire would meet, on average, a set standard for [greenhouse gas] emissions ... measured on a lifecycle basis to account for all emissions from fuel consumption and production," says the action plan, which can be found on the agency's website.Resources would include staff to "participate in regional planning and develop rule language, then a program ... to monitor and enforce compliance."The plan conceded that barriers would have to be addressed, including the "political will to pass legislation" as well as the development of various technologies.According to the action plan, fuel companies and consumers would pay for it, but implemental costs would be low, less than $2.5 million, while the potential economic benefit would be $25 million to $125 million.The plan says that development of a regional standard "needs to begin now so that a standard would be available for adoption by the region in the next 3 to 5 years. Phase 1 of the standard would occur over the next 10 to 15 years, achieving a 10 percent reduction in about 2025. ... The working group considered this an essential action to undertake in the early mid-term (2012)."Despite the strong language, Fitzgerald said the action plan was only saying that the standard was "something to evaluate. We could not implement this without the legalization."Over the next few years New Hampshire environmental officials worked with their counterparts in other states, through the Northeast States for Coordinated Air Use Management (NESCAUM), an organization headquartered in Boston, which refused to answer NHBR questions about the program.So far, all NESCAUM has produced publicly is an economic analysis, released last September, that cites economic benefits over the next decade if 10 percent of the region's fuel use is through low-carbon fuels, depending on the fuel used and the price of oil. According to NESCAUM, the benefits would include: an additional 9,000 to 50,000 jobs and an increase in the gross regional product of $7 billion to $29 billion.But critics called these estimates unrealistic."To meet the NESCAUM volume of 3 billion gallons of cellulosic ethanol, land area equal to that of the entire state of New Jersey (low end estimate) or Massachusetts, Connecticut plus Rhode Island combined (high end estimate) would be needed," wrote Robert L. Greco III, a director of the American Petroleum Institute."The batteries simply are not powerful enough to propel an 18-wheeler loaded with freight for an entire workday," complained Richard Moskowitz, vice president of the American Trucking Association. Fitzgerald defended the report."It examined what would happen if we achieved that standard, not what it would take to get there. Could it have a positive effect? The answer is yes -- a small one. It would have a tremendous positive impact if gas went to $5 a gallon."Likewise, Nancy Seidman, Massachusetts' deputy assistant commissioner for climate strategy, said the NESCAUM report "assured us that it was worth continuing."Defining 'clean'Even among those who want to pursue a standard, "there is a lot of caution" because "thorny issues remain," Fitzgerald said. The issues will have to hammered out by various officials in the coming months, as they try to put together a "framework" on how to proceed.Among the issues: How much credit do you give to different fuels for being "clean"? Do you just count emissions reductions or the whole cycle use, including production and distribution?Under the California standard, there is a difference between ethanol made from Iowa corn or from New Hampshire wood. Corn ethanol cuts down on carbon emissions, but it means making room for more farmlands, which contribute to global warming. And cellular biomass fuel -- made from trees, among other sources -- won't divert food into the tank of a car, but it has not been commercially developed yet.California's decision to rate such fuels differently led to the lawsuit by corn ethanol producers that has held up the program.Such a differential would help companies like Mascoma Corp., Lebanon-based cellulosic biofuel company that currently employs 110 people.A low-carbon standard would "accelerate commercialization of indigenously produced, sustainable fuels" CEO William Brady wrote to DES in November, urging the state to move toward one.Such issues haunt the other alternatives as well. Fracking -- pumping a liquid into the ground to squeeze out natural gas -- is why natural gas prices are so low. While fracking doesn't cause global warming, critics maintain that it pollutes groundwater and can even cause earthquakes.So does that mean you should measure gas differently, depending on the source? The natural gas option is one reason states like Pennsylvania signed on to the multi-state compact, but it might not stay if gas produced by fracking is not deemed clean enough.Similarly, electricity -- the cleanest fuel, emissions-wise -- is generated from natural gas and coal, both contributors to global warming. Not to mention nuclear power, not a contributor but certainly controversial.And do you count all the trees and vegetation removed to make way for bigger power lines to carry renewable energy?Another state that is making noises about pulling back from any deal is New Jersey, with its large concentration of oil refineries."Given the current economy, the current technology for alternative transportation, we are now urging new direction that takes into account economic considerations," said Lawrence Hajna, a spokesperson for the New Jersey Department of Environmental Protection.Legislator concernsThen there's the question of infrastructure.If there is no place to plug in your plug-in, a purely electric car is not viable and a hybrid would be using more gasoline, so its carbon footprint might be larger."We have very serious questions about the infrastructure," said Samantha DePoy-Warren, spokesperson for the Maine Department of Environmental Protection. The infrastructure concern is one of the reasons Maine has pulled back its support for developing a standard.The plan also envisions setting up a fund for fuel that isn't clean. But who would pay? The refiner (the target in California) or the distributor, which won't make the trucking industry happy.In any event, the corner gas station won't be taxed."We are not going to do it at the gas retail level," said Seidman. "We are all agreed on that."Other questions include: How many years would be required to reach targets? Which rules would be left up to individual states and which would be drawn up collectively?All this will be discussed in coming months, with or without New Hampshire.The DES currently uses federal funds that came through a multi-state settlement to pay the cost of New Hampshire's participation. But on Jan. 19, the House Science Technology and Energy Committee held hearings on House Bill 1487, which would prohibit "any funds from any source, without prior legislative approval, for the purpose ... planning, evaluating, implementing, or participating in any state, regional, or national" low-carbon fuel standard.Corey Lewandowski, state director of Americans for Prosperity and a supporter of the bill, testified it would prevent "state bureaucrats" from "entering a program that will cost the state money."However, some of the state's bureaucrats are pretty good, said the committee chair, Rep. James Garrity R-Atkinson.Garrity said he was not crazy about what he called a "liquid RGGI," which he thinks might be an "economic disaster."But New Hampshire is a small state without any refineries,Garrity said. "Do we say forget it about or let our people be in the discussion to try to put a brake on the runaway train?"Fitzgerald makes the same point. "If it happens around us, we might as well take advantage of it," Fitzgerald saidOn the Senate side, DES officials have thus far briefed Sen. Jeb Bradley, R-Wolfeboro, a key member of the Energy and Natural Resources Committee."I'm sort of skeptical. I'll listen to both sides," he said.Fitzgerald is hoping that other lawmakers will also keep an open mind."There is nothing to object to yet. First we need to get a handle on what this is and how it will work," he said.

This article appears in the February 10 2012 issue of New Hampshire Business Review